Perspective Management Services Sdn Bhd v Segamon Sdn Bhd [CAM]

www.ipsofactoJ.com/appeal/index.htm [2005] Part 1 Case 11 [CAM]

Coram

Perspective Management Services Sdn Bhd

- vs -

Segamon Sdn Bhd

MOKHTAR SIDIN JCA

K.C. VOHRAH JCA

FAIZA THAMBY CHIK J

30 SEPTEMBER 2004

The compromise reached in the other suit was as regards the delivery of the shares in the possession of the first defendant here to the plaintiff subject to payment being made by the plaintiff to the other defendants there and as regards the return of the shares in the first defendant there by the plaintiff to the solicitors of the second defendant there subject to the payment by the second defendant there at the agreed price whereas the amendments sought to be made in this action relate to the damages for the said retention of the shares by the defendants here. It cannot be said that the settlement in the other suit, where the parties and their capacities are not exactly the same, would prevent the plaintiff here from getting damages from the defendants here.

In Henderson v Henderson (1843) 3 Hare 100, it was said:

.... Where a given matter becomes the subject of litigation in, and adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties exercising reasonable diligence, might have brought forward at the time.

In Greenhalgh v Mallard [1947] 2 All ER 255, it was stated:

.... res judicata for this purpose is not confined to the issues which the court is actually asked to decide, but .... it covers issues or facts which are so clearly part of the subject matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.

From these decisions, it would appear that the other suit and this action are interrelated and a compromise in one would have automatically meant the end of the other. However, to my mind, the issue of damages had not been left out in the other suit on purpose or through negligence as the other suit was only to determine the beneficial ownership of the shares. After that was settled, it was up to the plaintiff whether or not to claim for damages if necessary. The fact that this action was not included in the consent order of the other suit, when both parties knew that it was pending, shows that the parties were aware then that this matter was still being proceeded with. By not insisting that this action be included in the compromise in the other suit is a strong indication that the first defendant held the view that the matters could be dealt with separately. The issue of res judicata, therefore, cannot apply.

(a)	At all material times, the first and/or second and/or third defendants had knowledge or means of knowledge that the APB shares were duly released by Visia to the plaintiff on the instructions of the first defendant and/or second defendant.
(b)	At all material times, the first and/or second defendants wrongfully lodged a police report which led to the seizure of the APB shares from the fourth defendant.
(c)	The first, second and/or third defendants wrongfully held themselves out to be the beneficial owners of the APB shares thereby preventing the APB shares from being duly split and registered by the fourth defendant in favour of the plaintiffs nominee.
(d)	Further, at all material times, the first, second and/or third defendants knew or ought to have known that in lodging the said police report and in representing themselves to the fourth defendant as beneficial owners, the plaintiff would be unable to proceed with the splitting and the sale of the APB shares.
(e)	The fourth defendant wrongfully failed to duly split and register the APB shares forwarded to them by the plaintiff.
(f)	The fourth defendant wrongfully failed to register the APB shares as instructed by the plaintiffs solicitors when they knew or ought to have known that the Kuala Lumpur Stock Exchange had ruled that they were obliged only to refuse to register such shares in the name of any party requesting such transfer and registration for a period of one (1) month from the date of the said ruling. Further, the fourth defendant was well aware that the first, second and third defendants had taken no further steps in law to protect their alleged beneficial interest in the APB shares. In consequence of the aforesaid breaches by the defendants, the plaintiff suffered loss) damage and expense.

(a)	the value of 900,000 Aokam shares as determined at the trial of this case.

The plaintiff is a company incorporated in Malaysia with a registered address at Lot 4.78, 4th Floor, Wisma Central, Ampang Road, 50450 Kuala Lumpur.

The plaintiff is and was at all material times the registered owner of 900,000 shares in Aokam Tin Bhd (now known as Aokam Perdana Bhd) ("Aokam") comprised in Share Certificates Nos A27476, A27477, A27478, A27479, A27480, A27481, A27482, A27483 and A27484 (the said shares).

The defendant is a company incorporated in Malaysia with a registered office at Nos 20 & 21-1, Telawi Road 3, Bangsar Baru, 59100 Kuala Lumpur and is the registrar of Aokam.

The defendant is in possession of the said shares at the date of the writ herein.

The plaintiff as registered owner of the said shares has the right and is entitled to immediate possession of the said shares.

Despite repeated demands by the plaintiff, the defendant has failed and/or refused to deliver up the said shares to the plaintiff.

WHEREFORE the plaintiff claims against the defendant:

(1)	a declaration that the plaintiff is entitled to the immediate possession of the said shares;
(2)	a mandatory injunction directed to the defendant requiring the defendant to forthwith deliver up the said shares to the plaintiff;
(3)	damages for wrongful detention of the said shares;
(4)	costs;
(5)	further or other relief.

From the decisions, it would appear that the other suit and this action are interrelated and a compromise in one would have automatically meant the end of the other. However, to my mind, the issue of damages had not been left out in the other suit on purpose or through negligence as the other suit was only to determine the beneficial ownership of the shares.

It will be observed that, among the allegations pleaded against the shipowners is a failure to deliver the goods in like good order and condition as when shipped. This reflects the fact that such a failure is prima facie evidence of breach of contract, and probably also of negligence (i.e. breach of duty as bailee), with the effect that the onus then passes to the shipowner to exonerate himself from liability, which is normally done by invoking one of the excepted perils.

However in a case like the present, in which the Hague Visby Rules apply, it is inevitable that attention will be focused upon the applicable obligations and exceptions in Articles III and IV of the rules, and that the dispute will be decided on the basis of those provisions.

I turn to the proceedings in India. As appears from the plaint in the Cochin action, the claim was in respect of deficiencies in (or, as we usually call it, short delivery of) the charge delivered at Cochin, viz 51 shells (and a small item described as "charge green bag"). According to the agreed statement of facts before Your Lordships, the 51 shells had been jettisoned at Cherbourg. The claim was advanced under one of the two bills of lading under which the consignment was shipped. Your Lordships were, however, informed that no point was taken on this, presumably because some of the 51 shells had in fact been shipped under each of the two bills of lading (see the particulars of loss under paragraph 10 of the amended statement of claim in the present proceedings ([1992] 1 Lloyd's Rep 124 at p 128). In the plaint, it was alleged that the shipowners had been guilty of negligence while the cargo was in transit in the vessel, which presumably refers to a breach of their duty as bailees (carriers for reward). However, in the judgment, the learned judge stated that it was "more or less not in dispute" that the law applicable to the carriage of the goods was the Indian Carriage of Goods by Sea Act 1925. That must have incorporated the old Hague Rules into the bill of lading contract; they are not for present purposes different from the Hague Visby Rules. Further, the judge made an express finding that the ship was seaworthy and cargo worthy. He then considered whether the shipowners were entitled to be relieved from liability (presumably under Article 111(2) by virtue of Article IV(2)(a) or (b) of the Hague Visby Rules, and decided that they were unable to do so on the facts of the case. Accordingly, he held the shipowners liable for the value of the undelivered cargo.

The argument advanced by the appellants before Your Lordships was that, for the purposes of ascertaining whether there was identity between the causes of action in the two sets of proceedings, a distinction had to be drawn between an action for damage to cargo (as in the present proceeding) and an action for short delivery (as in the Cochin proceedings). The submission was that, in accordance with the principle stated by Diplock LJ in Letang v Cooper [1964] 2 All ER 929 at p 935; [1965] 1 QB 232 at p 243 a cause of action consists of the minimum facts which a plaintiff is required in law to plead and (if traversed) prove in order to obtain the relief which he claims. The minimum facts which, it was submitted, have to be proved in a damage to cargo claim are (1) the condition of goods on shipment and (2) their damaged condition on delivery; whereas in a short delivery claim they are (1) the quantity of the goods shipped and (2) the lesser quantity delivered. It follows, ran the submission, that there was no identity between the causes of action in the two sets of proceedings.

Furthermore, the appellants submitted, the Court of Appeal had in truth confused the principle of res judicata, under which the same cause of action, cannot be litigated twice, with the wider principle in Henderson v Henderson (1843) 3 Hare 100; [1843-60] All ER Rep 378, under which a point which could and should have been but was not raised in certain proceedings is barred in subsequent proceedings in which the same issue arises. On this basis, the appellants were able to argue, first, that s 34 of the 1982 Act did not apply, and second, that on the principle in Henderson v Henderson, which does not apply in certain special circumstances, arguments were open to them which required investigation and which rendered it inappropriate to strike out their statement of claim in the present case.

Now the difficulty with this argument is that it ignores the fact that the goods in question were shipped under a contract of carriage the terms of which (as set out in the Hague Rules or the Hague Visby Rules) regulate the respective rights and obligations of the parties. In these circumstances, the mere fact that the pleader can, so to speak, get the case on its feet by alleging short delivery or delivery of the goods not in the like good order and condition as when shipped, does not in my opinion assist. For it is wholly unrealistic to regard the cause of action as being other than a cause of action arising under the contract, which provides for the relevant duties of the shipowners regarding the seaworthiness of the ship and the care of the goods. Even if attention is concentrated on the liability of the shipowner as bailee, the fact remains that he is a bailee for reward, and that accordingly his liability will be governed by the terms of the contract of carriage.

In these circumstances, the case is very different from a simple action in negligence, as for example a running down action, where damage is of the essence of the claim in the sense that damage must be proved to establish the cause of action. In such a case, it is theoretically possible to segregate different causes of action by reference to different heads of damage. Thus in Brunsden v Humphrey (1884) 14QBD 141; [1881-5] All ER Rep 357, a case concerned with res judicata, a distinction was drawn between damage to the plaintiffs carriage and damage to his person arising out of the same incident, and it was held that an earlier action by the plaintiff for the former constituted no bar to a subsequent action for the latter. The decision has not been without its critics, who prefer the dissenting judgment of Lord Coleridge CJ; but so narrow an approach is not in any event possible in a contractual context, where proof of damage is not necessary to establish the cause of action. Here, as is shown by Conquer v Boot [1928] 2 KB 336; [1928] All ER Rep 120, it is necessary to identify the relevant breach of contract; and if it transpires that the cause of action in the first action is a breach of contract which is the same breach of contract which constitutes the cause of action in the second, then the principle of res judicata applies, and the plaintiff cannot escape from the conclusion by pleading in the second action particulars of damage which were not pleaded in the first. In Conquer v Boot the relevant breach of contract was identified as being breach of a promise to complete a bungalow which the defendant was building for the plaintiff. Talbot J said ([1928] 2 KB 336 at pp 344-345; [1928] All ER Rep 120 at p 124):

Here there is but one promise, to complete the bungalow; and the question whether or not it has been performed is to be decided by the state in which the bungalow was when it was handed over by the defendant to the plaintiff as complete. From that moment the Statute of Limitations began to run as to the whole. The plaintiff could not alter the fact that he was recovering damages for the breach of this single promise by failing to specify in his action all the particulars of the breach and all the damages to which he was entitled. The test whether a previous action is a bar is not whether the damages sought to be recovered are different, but whether the cause of action is the same ....

Talbot J expressed his conclusion as follows ([1928] 2 KB 336 at p 346; [1928] All ER Rep 120 at p 125):

I think therefore that the plea of res judicata or judgment recovered is an answer to the whole of this action, and that the defendant is entitled to judgment.

If I turn to the present case, I find that the situation is not precisely the same. The present case is not concerned with the failure to construct a building in accordance with a certain specification, which can result in a whole series of defects which may nevertheless lead to a single breach of contract, i.e. the failure to hand over the building constructed in accordance with the terms of the contract. It is rather concerned with a single incident, i.e. the fire during transit which broke out in the cargo over which the appellants' consignment of munitions was stowed, which resulted in the damage to that consignment and to loss (by jettison) of a small part of it. Furthermore, as appears from the pleadings, that loss or damage might have resulted from breach of more than one term of the contract, for example breach of the obligation to make the vessel seaworthy under Article 111(1) of the Hague Visby Rules, or breach of the obligation to load and stow etc the vessel carefully under Article 111(2).

However, for present purposes, there is no need to distinguish between the two breaches, because the factual basis relied upon by the appellants as giving rise to the two breaches in the same, and indeed was referred to compendiously by the appellants in the Cochin action as "negligence". In these circumstances, I am satisfied that there is identity between the causes of action in the two sets of proceedings.

What is res judicata? It simply means a matter adjudged, and its significance lies in its effect of creating an estoppel per rem judicatum. When a matter between two parties has been adjudicated by a court of competent jurisdiction, the parties and their privies are not permitted to litigate once more the res judicata, because the judgment becomes the truth between such parties, or in other words, the parties should accept it as the truth; res judicata pro veritate accipitur. The public policy of the law is that, it is in the public interest that there should be finality in litigation – interest rei publicae ut sit finis litium. It is only just that no one ought to be vexed twice for the same cause of action – nemo debet bis vexari pro eadem causa. Both maxims are the rationales for the doctrine of res judicata, but the earlier maxim has the further elevated status of a question of public policy.

Since a res judicata creates an estoppel per rem judicatum, the doctrine of res judicata is really the doctrine of estoppel per rem judicatum, the latter being described sometimes in a rather archaic way as estoppel by record. Since the two doctrines are the same, it is no longer of any practical importance to say the res judicata is a rule of procedure and that an estoppel per rem judicatum is that of evidence. Such dichotomy is apt to give rise to confusion.

The starting point ought to be the celebrated passage by Wigram VC in the case of Henderson v Henderson (1843) 3 Hare 100 at p 115 which is:

The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence might have brought forward at the time.

It may be of interest to point out that one of the exceptional special cases is the effect of a default judgment in subsequent proceedings between the same parties, a default judgment is different from a final judgment on the merits, the latter is the category to which the judgment in the said originating motion given before the filing of the action as concerned directly herein below belongs. Please see the finer points of law in regard to default judgments from the position of the doctrine of res judicata in Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] MLJ 49. We have thus mentioned this question of default judgment in passing as it has sometimes been a small source of confusion to the litigants.

To revert to that famous passage set out above, the next step is to state our view on its scope of operation or approach towards such scope which has given rise to certain controversial aspects referred to earlier. Bearing in mind the well-known relevancy of a previous judgment in barring a second suit, e.g. please see s 40 of the Evidence Act 1950, it will be readily understood that when Wigram VC spoke of "points", the points should actually include causes of action, or all causes of action which one of the two parties has against the other, based on, or substantially on the same facts or issues, and not just all issues of law or of fact that are in dispute between the parties. The relevant case law revolves itself into this understanding. Lack of this understanding causes, in our view, a fair share of the confusion in connection with the famous passage of Wigram VC which Lord Shaw in Hoystead v Taxation Commissioner [1962] AC 155 at p 170 spoke of as "settled law" in the Privy Council.

Thus, there are in fact two kinds of estoppel per rem judicatum. The first type relates to cause of action estoppel and the second, to issue estoppel, which is a development of the first type.

The cause of action estoppel arises when rights or liabilities involving a particular right to take a particular action in court for a particular remedy are determined in a final judgment and such right of action, i.e. the cause of action, merges into the said final judgment; in layman's language, the cause of action has turned into the said final judgment. The said cause of action may not be re-litigated between the same parties because it is res judicata.

In order to prevent multiplicity of action and also in order to protect the underlying rationales of estoppel per rem judicatum and not to act against them, such estoppel of cause of action has been extended to all other causes of action (based on the same facts or issues) which should have been litigated or asserted in the original earlier action resulting in the final judgment, and which were not, either deliberately or due to inadvertence ....

....

On the other hand, the issue estoppel literally means simply an issue which a party is estopped from raising in a subsequent proceeding. However, the issue estoppel, in a nutshell, from a consideration of case law, means in law a lot more, i.e. that neither of the same parties or their privies in a subsequent proceeding is entitled to challenge the correctness of the decision of a previous final judgment in which they, or their privies, were parties. This sounds like explaining a truism, but it is the corollary from that statement that is all important and that could have given birth to the controversies alluded to above; the corollary being that neither of such parties will be allowed to adduce evidence or advance any argument to contradict such decision. In this respect, we respectfully agree with Peter Gibson J in Lawlor v Gray [1984] 3 All ER 345 at p 350, who said: "Issue estoppel .... prevents contradiction of a previous determination, whereas cause of action estoppel prevents reassertion of the cause of action."

It is important to bear in mind the manner in which the issue estoppel operates in preventing such contradiction of the previous judgment.

There is one school of thought that issue estoppel applies only to issues actually decided by the court in the previous proceedings and not to issues which might have been and which were not brought forward, either deliberately or due to negligence or inadvertence, while another school of thought holds the contrary view that such issues which might have been and which were not brought forward as described, though not actually decided by the court, are still covered by the doctrine of res judicata, i.e. doctrine of estoppel per rem judicatum.

We are of the opinion that the aforesaid contrary view is to be preferred; it represents for one thing, a correct even though broader approach to the scope of issue estoppel. It is warranted by the weight of authorities to be illustrated later. It is completely in accord or resonant with the rationales behind the doctrine of res judicata, in other words, with the doctrine of estoppel per rem judicatum. It is particularly important to bear in mind the question of the public policy that there should be finality in litigation in conjunction with the exploding population; the increasing sophistication of the populace with the law and with the expanding resources of the courts being found always one step behind the resulting increase in litigation.

It is further necessary at this stage to understand the import of the words in the said famous statement, i.e. ".... every point which properly belonged to the subject of litigation ...." which Somervell LJ explained in Greenhalgh v Mallard [1947] 2 All ER 255 at p 257 as follows:

This explanation of Somervell LJ was also quoted with approval in the Privy Council in Yat Tung Investment Co v Dao Heng Bank [1975] AC 581; [1975] 2 WLR 690.

In Yat Tung's case itself, the bank sold some property to Yat Tung which mortgaged the same property back to the bank. Yat Tung defaulted on payment of interest on the mortgage and the bank exercising its right of sale, sold the same properly to the second respondent. After such sale to the second respondent, in 1969, Yat Tung sued the bank on the ground that the bank's sale of the property to Yat Tung in the first place was a sham and therefore a nullity and the bank counterclaimed for loss on resale to the second respondent, denying the alleged nullity. Yat Tung failed in this first action and the bank succeeded. After the judgment, Yat Tung in 1972 once more in a second action on the ground that the subsequent sale by the bank to the second respondent of the same property was fraudulent, etc on the ground of some collusion between the bank and the second respondent. It will be remembered that the sale to the second respondent took place before Yat Tung filed the earlier action. On appeal, and even further appeal to the judicial committee, the order was confirmed on the ground that the doctrine of res judicata applied.

Thus, in SCF Finance Co Ltd v Masri (No 3) [1987] QB 1028; [1987] 1 All ER 194, the English Court of Appeal held that even a reservation of an issue by a party in a previous proceeding was ineffective to prevent the estoppel from arising against the said party, where the said party had pleaded chat issue but elected not to proceed on the issue in the previous proceeding. It was held she was not entitled to assert that issue afresh in subsequent proceedings, even if that issue was not heard and determined and it was even "reserved".

....

A word of caution is required about the words "exercising reasonable diligence" in the said famous passage [in Henderson v Henderson (1843) 3 Hare 100]. The words do not, in our view, necessitate a mental exercise of making a finding as to whether there was diligence, or reasonable diligence, in the earlier failure to bring in at the previous trial, the issues which should have been brought in the earlier action and which were not. or in asserting all other causes of action arising out of the same facts in the earlier action and which were not.

The words ought to be understood as a gentle rebuke for the failure aforesaid, i.e. despite the fact that the party had the opportunity of bringing forward all such issues or asserting all such causes of action; and the words are not meant to impose a pre-condition for applying the doctrine of res judicata but are meant to say that the said non-bringing of the issues would count in any event irrespective of whether the said failure was or was not deliberate or due to inadvertence or negligence. Otherwise, the words would have virtually all but destroyed the efficacy of estoppel per rem judicatum.

Another source of small confusion is the rule that generally an estoppel, of which an estoppel per rem judicatum is a kind, as the name implies, has to be pleaded. But in Superintendent of Pudu Prison v Sim Kie Chong [1986] 1 MLJ 494 at p 498, Abdoolcader SCJ held to the effect that the court has the inherent jurisdiction to dismiss an action by applying the doctrine of res judicata against a party even it has not been pleaded. We venture to think the reason for the ratio is that an estoppel or exclusion of evidence based on a question of public policy, i.e. in this case, the question of public policy that there should be finality in litigation, is more vigorous in excluding evidence and need not be pleaded, unlike an ordinary estoppel which should be pleaded.

We think we have dealt with certain parts of the doctrine of res judicata sufficiently for the purpose of determining the instant appeal. We now revert to the factors in the instant appeal.

Looking at the wording of both the earlier originating motion aforesaid and the statement of claim in the action concerned therein, and looking also at the content of the supporting affidavit of the earlier originating motion, the causes of action of both proceedings are identical. Both claim damages for failure or refusal of the identical finance company to allow the same borrower to utilize in full the identical loan of RM730,000, causing loss consequent upon the failure of the identical housing scheme or housing development to be proceeded further. The action in the court below and immediately concerned herein claims only one relief or one relief in substance, damages for refusal to allow the borrower to borrow the full sum of RM750,000.

Again all rights and liabilities of both parties had merged into the judgment delivered on the said originating motion and the judgment was confirmed by the Supreme Court and it is therefore final. The cause of action estoppel applies unquestionably against the borrower and the borrower's case represents a classical case for the application of the doctrine of res judicata by way of a cause of action estoppel; the cause of action being the action for damages for refusal of the finance company to allow the borrower to utilize or borrow completely the total sum of the agreed loan. The effect of a cause of action estoppel is so absolute that it is really unnecessary to delve further into the issues of law or of fact. What we just said however is subject to what is to be said further below.

.... However, to my mind, the issue of damages had not been left out in the other suit on purpose or through negligence as the other suit was only to determine the beneficial ownership of the shares. After that was settled, it was up to the plaintiff whether or not to claim for damages if necessary. The fact that this action was not included in the consent order of the other suit, when both parties knew that it was pending, shows that the parties were aware then that this matter was still being proceeded with. By not insisting that this action be included in the compromise in the other suit is a strong indication that the first defendant held the view that the matters could be dealt with separately. The issue of res judicata, therefore, cannot apply.

Matters left out

Not infrequently the analysis of the appropriate materials will disclose that the parties expressly or by necessary implication compromised certain matters of dispute but not others. In some cases it will be clear that certain matters were expressly or by implication not made part of the compromise. However, there may be cases where, on any objective view, the parties could and should have dealt with a particular matter but neglected to do so. To what extent will they be permitted by the court to litigate that matter on some future occasion?

It is submitted that there is, in principle, a distinction between compromises effected merely by agreement and those effected by a judgment or order. In the former case, unless the court can imply a term to the effect that the matter was compromised, the agreement as construed must stand: the court will not rewrite the parties' bargain. It may be quite possible for the agreement to be effective without the matter in question having been made specifically part of it. In the latter case, where the compromise is embodied in a judgment or order, an extension of the doctrine of res judicata may operate to prevent the matter being litigated. In Henderson v Henderson it was said:

.... where a given matter becomes the subject of litigation in, and adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties exercising reasonable diligence, might have brought forward at the time.

In Greenhalgh v Mallard, it was said:

Thus, where parties have compromised their litigation and have finalized the matter by a consent judgment or order, it would appear to be open to a party to plead res judicata in this wider sense if the other sought to raise afresh a matter which "probably belonged" to that litigation but which, through negligence, inadvertence or accident, had not been raised and thus compromised expressly.